ANALYSIS: The federal government has tapped into the groundswell of public opinion advocating for more EV incentives, and on Wednesday announced it would introduce a vehicle emissions performance standard.
Minister for Energy and Climate Change Chris Bowen announced the policy in tandem with the National Electric Vehicles Strategy. The standards are expected to be introduced at the end of 2023 after a thorough round of public consultation.
“The absence of a standard has meant Australians households and businesses are missing out on greater choice of car models and paying more in fuel costs to run their cars because manufacturers prioritise sending more efficient vehicles to countries with standards in place,” Minister Bowen said in a statement.
This will bring Australia into line with all developed countries besides Russia, which have all legislated fuel efficiency standards.
Last week The Fifth Estate last week reported on a call from more than 120 mayors and elected council officials for the federal government to regulate motor vehicle emissions to help bring down the cost of EVs so councils could afford to buy them.
The government stopped short of announcing details on the policy or making a firm commitment for a starting point on fuel efficiency – such as the 95g CO2/km that advocacy groups have recommended.
This is a fair call, given the complexity of fuel efficiency standards, which measure the overall fuel efficiency of new vehicles across a manufacturer’s fleet in any given year. The standard tightens over a five to 10 year period – in some countries it accelerates sharply in the first few years, while others opt for a slower more gradual tightening.
The government also needs to consider the type of incentives that manufacturers are offered if the average fuel efficiency of their fleet beats the fuel standard cap.
Getting this right is crucial because it is the credits that encourage manufacturers to develop zero emissions vehicles but if they are too loosely applied there will be no incentive for reducing the emissions of internal combustion engine models, which will be instrumental in lowering the sector’s CO2 emissions.
Industry reacts positively – but urges caution on incentives and credits
The move was unsurprisingly met with unanimous support from climate and EV advocacy groups including the Electric Vehicles Council, the Climate Council and Solar Citizens.
However, they warned that the performance standard must be internationally competitive and that the permitted CO2 emissions must fall to zero within 10 years so that international automobile manufacturers send the most advanced and efficient models to Australian shores. They also warned against supplementing the system with too many credits for vehicle manufacturers because it would undermine progress.
“It’s a relief that an Australian government has finally committed to fuel efficiency standards, which have been operational in the US and Europe for decades, Electric Vehicles Council chief executive Behyad Jafari said.
“But with those jurisdictions now leaping forward in terms of ambition Australia must bring in strong standards that keep pace with the modern world. If we squib it on the detail Australia will remain the world’s dumping ground for dated, high-emission vehicles.”
Savings on offer could be up to $11.2 billion in fuel costs over five years
The Climate Council recommends fuel efficiency standards that align with the US, European Union and New Zealand, and for the standards to be legislated so manufacturers cannot opt out. It also called for manufacturers to make genuine reductions in the emissions intensity of their vehicles and not to overly rely on incentives that would undermine the system.
Solar Citizens’ recent Recharging Australia report found that a fuel efficiency standard for light vehicles of 95 grams CO2/km would save Australian motorists $11.2 billion in fuel costs over five years. This could boost EV sales from 14,255 in 2020 to more than 913,359 in five years.
The report also recommended a slightly different trajectory for light commercial vehicles such as utes, given there are fewer available models and the price point is still reasonably high compared to their ICE equivalents. But it cautioned that the scheme must reach 0 grams of CO? per kilometre after ten years if Australia is to meet Net Zero emissions by 2050.
New Zealand, which regulates fuel efficiency via its Clean Car Standard, began its policy in 2023 with a year one limit of 145g CO2/km, falling to 63.3g CO2/km in 2027.
At that point the country’s fleet will be 62.5 per cent more efficient than the 169g CO2/km it is today. The Recharge Australia report found that if these standards were applied to Australia, it would produce $7.3 billion in fuel cost savings over five years, although this is $3.9 billion less than if the EU’s emissions policies were adopted.
Australia plays catch up on emissions policies – again
Australia does not sufficiently measure or monitor the fuel efficiency of its national vehicle fleet, something the advocacy groups said would need to change once the new policy is introduced.
Transport accounts for 18 per cent of Australia’s greenhouse gas emissions, and road transport contributes 85 per cent of the total amount. Within that 60 per cent of road transport pollution is caused by passenger and light commercial vehicles.
Recent changes to the way researchers estimate the number of deaths caused by motor vehicle pollution now suggests that it causes up to 11,000 premature deaths of Australian adults each year – this is 10 times the number killed in motor vehicle crashes. Pollution also causes 12,000 cardiovascular hospitalisations and 7000 respiratory hospitalisations each year.
In other positive news for EVs, the Australian Renewable Energy Agency on Wednesday announced it would deploy $146.1 million over five years from 2023-2024 to co-fund transport decarbonisation projects, with $70 million of the funding pool now available for projects that encourage innovation in either public charging systems or the management of charging systems.
Excitement about a more supportive policy environment for EVs was tempered by suggestions that the electricity grid may struggle to cope with the extra demand placed on the network from EV charging in homes and offices.
“We need to remember that our country’s electricity grid and charging infrastructure are currently not sufficiently equipped to handle a significant uptake of electric vehicles. We are lagging many other countries in terms of charging infrastructure, and so a lot of work is required to build the required charging networks,” Dr Roger Dargaville, deputy director of Monash Energy Institute, said.
Besides charging infrastructure, we require a smart grid that can manage increased electricity demand alongside intermittent renewable energy generation, Dr Dargaville added.